HP losing grip of EDS’s Ministry of Defence contract

HP’s grip on a flagship Ministry of Defence deal (MoD) could be weakening after rival CSC took over the pay and pensions administration services of the Service Personnel and Veterans Agency (SPVA).

The SPVA contract is part of the Defence Information Infrastructure (DII) deal that EDS, since acquired by HP, has held since 2005. The overall DII deal is worth about £1bn a year and includes a wide range of services including the training of military personnel.  

HP bid for a renewal of the SPVA contract in partnership with Xafinity Paymaster but CSC was chosen as the preferred bidder.

Analyst firm NelsonHall says HP has been providing payroll services to the UK military since 1997 as a result of its acquired EDS heritage. 

“HP's unsuccessful attempt to renew the contract is not about poor performance. In its 2010/11 annual report, the SPVA talks of ‘excellent team working of both MoD and HP’ and the agency's six strategic performance priorities were all met or surpassed,” said NelsonHall research director Sarah Burnett.

She said CSC is not the obvious winner for a major payroll business process outsourcing (BPO) award: “It has a very small presence in HR BPO services, most notably within a back-office BPO and IT services contract for NASA. Price was presumably a major factor in the SPVA decision. CSC's relationship with the UK government has been stretched over the failure of the two parties to reach agreement over a memorandum of understanding (MoU) for the continuation of the NHS National Programme local service provider contract. Presumably CSC will be signing the long-delayed MoU with the NHS before this contract is signed.”

An industry source said the SPVA deal is small in comparison with the massive DII contract but is a significant weakening of HP’s grip. He said many of the large contracts that EDS won are up for renewal in the next 14 to 30 months.

“The mice have been nibbling at the EDS sack of grain since HP acquired it, but this could create a hole that grain might pour out of,” said the source, who is familiar with the contract.